5 bank stocks where Kotak Institutional Equities sees over 20% more upside despite recent run

Even as banking stocks witnessed strong momentum in recent months, brokerage Kotak Institutional Equities suggests that the valuation of stocks from the sector is still not expensive.

Public and private banks are still either close to their long-term averages or marginally higher, it said.

“Public banks are just marginally higher than where they were pre-Covid despite substantial improvement in their asset quality ratios. On the other hand, the improvement in valuations for private banks has been relatively slower,” said the brokerage.

The tier-2 private banks and regional banks had struggled post-Covid as their portfolios were skewed to a customer segment that was vulnerable to this slowdown. However, the performance on asset quality in the past two quarters gives comfort that the asset-quality issues are gradually fading and these banks are ready for growth, it said.

“We had seen a sharp divergence in price to book multiples as the corporate NPL cycle was unfolding. However, we see a reversal in trends today as these corporate NPL heavy banks have shown much better resilience during the Covid cycle,” said the Kotak report.

Most of this resilience is primarily due to their lower exposure to sectors impacted by Covid, KIE said. While their existing exposures to corporate were not only resilient but they were able to substantially deleverage their balance sheets, giving comfort and confidence to investors to be a lot more optimistic, it added.

Here are top picks by Kotak Institutional Equities:


1. Bank – The brokerage has a target price of Rs 700 on the leading public sector bank suggesting an upside potential of 27 per cent.

2. – The brokerage has a target price of Rs 960 on the private lender suggesting an upside potential of over 25 per cent.

3. – The stock of India’s largest private sector bank is seen rallying up to Rs 1,750 or about 21 per cent.

4. – The brokerage has a target price of Rs 1,070 on the stock suggesting an upside potential of 21 per cent.

5. – The brokerage has a target price of Rs 145 on the scrip suggesting an upside potential of 34 per cent.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)



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